Trading Day: Resilience trumps uncertainty
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Choppier waters ahead? One of the biggest surprises in a week overflowing with them - from top-tier economic indicators , to company earnings and policy decisions from around the world - was how steadfast financial markets were.Global and U.S. stocks closed the week with gains of up to 3%, the dollar advanced, Treasury yields rose, and the VIX index of U.S. equity market volatility eased. On the surface, a strong week for investor sentiment and risk sentiment.But that would be only half the story.Figures showed that the U.S. economy shrank in the first quarter - a statistical anomaly due to a record hit from trade, perhaps, but the first contraction in three years, nevertheless, and putting the economy halfway towards a technical recession.Some of that gloom was countered by unequivocally positive GDP figures from the euro zone. And yields and stocks leaped higher on Friday after April's non-farm payrolls report showed the Trump administration's global trade war has yet to be materially felt in the U.S. labor market.On the corporate front, dozens of leading global firms cut or declined to give forecasts in their first-quarter earnings, such is the uncertainty surrounding tariffs. Yet the overall tone from these calls this week was positive, and investors have consistently bought the post-Liberation Day dip.One of the most significant developments this week for world markets came from Tokyo, where the Bank of Japan kept interest rates on hold as expected but slashed its growth outlook and lowered its inflation forecasts. The yen tumbled, but still ended the week essentially flat.So, some huge price swings in individual shares and assets. In the U.S. and beyond, there's little evidence that trade uncertainty is prompting companies to lay off workers or jack up prices. Not yet anyway.There's a growing belief that U.S. President Donald Trump is backing away from his more belligerent tariff threats, and that a more receptive Washington is closing in on several bilateral trade deals. Tensions with China may even be cooling too.However, the risks to growth and markets lie ahead, and a "cliff-edge type of adjustment" in the coming months is possible, warns RBC BlueBay Asset Management's Mark Dowding."There appear to be similarities to the Roadrunner cartoon, in which Wile E. Coyote keeps on running, long after the ground has disappeared beneath his feet, ahead of the inevitable moment of realisation when gravity kicks in," he wrote on Friday.With consumer sentiment sliding and inflation expectations rising, stagflation looms. For markets, that suggests choppy waters ahead rather than plain sailing.I'd love to hear from you, so please reach out to me with comments at . You can also follow me at @ReutersJamie and @reutersjamie.bsky.social.* Britain's FTSE 100 notches a record 15 consecutive daily gains, the longest winning streak since the index was launched in 1984.* Wall Street rallies on Friday, ending the week up around 3%. The Dow has its best run since December 2023, the S&P has its longest winning streak since November 2024.* U.S. bond yields rise as much as 7 basis points, thanks to a sharp rise on Friday after the April employment report.* Oil falls 8%, with Brent crude futures at a four-year closing low on Friday of $61.17/bbl ahead of Saturday's OPEC+ meeting. Japan's Nikkei 225 rises 3% on U.S. trade deal optimism and weaker yen. Index rises seven days in a row, its best run since August-September, 2023.* Gold slips 2.6% on the week, easing further back from its recent $3,500/oz high.In his first term in office, U.S. President Donald Trump regularly took credit on social media for the boom on Wall Street. He has been less vocal this time around, and with stocks down since his inauguration, this week he posted: "This is Biden's Stock Market, not Trump's," adding that the recent slide had "NOTHING TO DO WITH TARIFFS".April 30 marked the first 100 days of Trump's second term, and the following chart shows where they rank in history. Stocks have clawed back some of these losses in the last two days, and if the rebound continues, maybe it will be Trump's stock market after all.1. America's Economic Tailwinds Will Override Trump and His Tariffs2. Trump and the Triumph of the Technolords3. The Smoot-Hawley Trade War4. Trump tariffs expose US weak flank in services5. Remarks by Kevin Warsh - Commanding Heights: Central Banks at a Crossroads IMF Lecture Hosted by G30What could move markets on Monday?* Australia reaction to Saturday's general election* Indonesia GDP (Q1)* U.S. services ISM and PMI (April)* U.S. 3-year Treasury note auctionOpinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.Trading Day is also sent by email every weekday morning. Think your friend or colleague should know about us? Forward this newsletter to them. They can also sign up here.
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Mint
31 minutes ago
- Mint
Weak dollar reprises its role as carry trade funder
Trump's presidency boosts dollar-funded carry trades Goldman Sachs sees carry trades as a major theme Rupee, rupiah and real among top picks for their carry MUMBAI, June 2 (Reuters) - The U.S. dollar's weakness since the start of Donald Trump's presidency has made it the preferred funding currency for popular "carry" trades, fuelling heavy flows into higher-yielding emerging market currencies. Dollar-funded carry trades in the Indonesian rupiah, Indian rupee, Brazilian real, Turkish lira among other currencies, are back in vogue, fund managers said. In a typical currency carry trade, investors use cheap-to-borrow currencies to fund investments in those with better yields. Returns are boosted if the borrowed currency weakens. The dollar, traditionally less favoured than the Japanese yen or Swiss franc for such trades, has become the funding currency of choice as Trump's trade war stokes recession worries and an investor retreat from U.S. Treasuries. Carl Vermassen, a portfolio manager at Zurich-based asset manager Vontobel, has added to carry trades on the rupee and rupiah. "Emerging market local currency was basically shunned for the simple reason: to avoid local currency risk at a time of an almighty dollar," he said. "But, given most investors deem U.S. exceptionalism to have ended, things are changing." Claudia Calich, head of emerging market debt at M&G Investments, also expects dollar weakness to persist and support carry trades. The London-headquartered fund oversees more than 312 billion pounds ($423.5 billion) and favours the rupee and Philippine peso for carry positions within Asia and the Brazilian real and Mexican peso in Latin America. The more investors rush back into dollar carry trades, the deeper the dollar's losses are likely to be, analysts said. The dollar index has fallen 8.5% so far this year, dropping below the critical 100 mark in mid-April for the first time in nearly two years. It was last seen at 99.30. That means investors are finding good carry not just in the likes of the rupee and rupiah, whose yields are above those in the United States, but even those with low interest rates such as the South Korean won. The won has led gains in Asian currencies this year with a 6.7% rally against the dollar. The yield advantage over dollars, or the "carry", measured by the three-month tenure is 2% on the Indian rupee and 1.2% for Indonesia's rupiah. Brazil's real gives a much higher carry at 9% but is far more volatile, meaning the trade could go horribly wrong if the currency depreciates, instead of appreciating. The future expected 3-month volatility, also called implied volatility, for the real is 8.1% compared with 4.7% for the rupee. Goldman Sachs said carry trades were "a big theme" in recent meetings with its New York clients, with interest growing in Latin American and European markets. "If volatility settles some more, we will start to hear more about dollar-funded carry trades," ING Bank said. "This could be a story for this summer." Since "FX carry trades" typically involve investments in bond or money markets in these destinations, analysts expect to see heavy flows into emerging markets. Data for April shows investors bought bonds worth $8.92 billion, the highest for any month since last August, in South Korea, India, Indonesia, Thailand and Malaysia. While some of those flows could have been straight real-money investments into these markets, analysts say carry trades also boomed. In South Korea, foreign investors bought $7.91 billion in bonds, the most since May 2023. Tom Nakamura, vice-president and head of fixed income & currencies at Canadian fund AGF Investments, finds carry trades in Turkey attractive since the central bank's adoption of more orthodox monetary policy. Turkey's benchmark rates are at 46%. (Reporting by Nimesh Vora; Additional reporting by Jaspreet Singh Kalra in Mumbai and Johann Cherian in Bengaluru; Editing by Vidya Ranganathan and Jacqueline Wong)
Mint
32 minutes ago
- Mint
Aluminium industry body says Trumps move to double tariff will hurt sector
New Delhi, Aluminium industry body AAI has expressed concerns that US President Donald Trump's announcement to double tariffs on aluminium imports in that country will hurt the Indian manufacturers who are already under pressure from surging low-cost imports. On May 30, Trump announced that he would double the existing 25 per cent tariffs on aluminium imports from June 4. "The 50 per cent tariff announced by Trump will damage the Indian aluminium industry, which is already under pressure from surging low-cost imports," Aluminium Association of India said. The metal has strategic importance to the country and critical to industries such as defence, aerospace, energy transition, telecommunications, power and construction, it said, adding that both primary aluminium and poor quality scrap are entering the country in large volumes, threatening to create a surplus, suppress domestic prices, and undercut the viability of domestic producers. Though the government just announced a 12 per cent provisional safeguard duty on certain steel imports, AAI said there should be duty guardrails for the aluminium industry as well, which has so far invested more than Rs. 1.5 lakh crore to set up the current domestic primary aluminium capacity of 4.2 million tonnes per annum . FIMI Director General B K Bhatia stated that the major share of Indian exports of aluminium is accounted by US valuing about USD 946 million. A further increase in tariff is bound to have adverse impact on Indian aluminium exports market. "We are hopeful that this issue will get resolved during ongoing trade negotiations between India and USA," he said. In 2024-25, India exported iron, steel, and aluminium products worth USD 4.56 billion to the US, with key categories including USD 587.5 million in iron and steel, USD 3.1 billion in articles of iron or steel and USD 860 million in aluminium and related articles. This proposed hike is tariff comes under Section 232 of the US Trade Expansion Act of 1962, which allows the president to impose tariffs or other trade restrictions if imports are deemed a threat to national security. Trump originally invoked this provision in 2018 to set the 25 per cent tariff on steel and 10 per cent on aluminium. He raised tariffs on aluminium to 25 per cent in February 2025. This article was generated from an automated news agency feed without modifications to text.
Time of India
33 minutes ago
- Time of India
Watch: How Elon Musk dodged a question on Trump's foreign student ban
dodged the question over a ban on foreign students and said to ask about the subject- spaceships. Musk's pre-taped interview with CBS, which was taken ahead of the ninth test flight of the Starship, was released Monday, and it began on a tense note. Tired of too many ads? go ad free now CBS correspondent David Pogue opened the conversation by asking about how the Trump administration's new policies had affected his business but then he moved to ban on foreign students, which seems to upset the Tesla CEO and former head of the department of government efficiency, DOGE. 'Wondering what your thoughts are on the ban on foreign students — the proposal,' Pogue asked. 'I mean, you were one of those kids, right?' he added, pointing out that Musk, originally from South Africa, had been an international student himself, attending the University of Pennsylvania in the 1990s. Looking uncomfortable, Musk initially tried to respond, but then he asked to change the question. He said, 'Yeah, I mean, I think we want to stick to, you know, the subject of the day, which is like spaceships, as opposed to presidential policy.' When Pogue said he was told 'anything was good' to talk about, Musk laughed nervously and replied, 'No… Well, no.' Despite the awkward exchange, Musk did weigh in on Trump's newly passed 'big, beautiful bill.' Passed by a narrow 215–214 margin on May 22, the bill aims to extend Trump's 2017 tax cuts. 'I was disappointed to see the massive spending bill, frankly, which increases the budget deficit, not just decreases it, and undermines the work that the DOGE team is doing,' Musk said. 'I think a bill can be big, or it can be beautiful, but I don't know if it can be both. My personal opinion,' he added. Musk's remarks come as he steps back from his position as the head of the Department of Government Efficiency under pressure from Tesla's board, the electric vehicle company he founded and leads. Tired of too many ads? go ad free now Immigrant's path now under his own scrutiny Meanwhile, renewed scrutiny has emerged around Musk's immigration history. A Washington Post report revealed that after leaving Stanford University in 1995 to launch his first company, Zip2, Musk likely worked in the US without the proper legal authorization. Legal experts say that foreign students are not allowed to drop out of school and start a company—even if they are not drawing a salary. Musk has previously said, 'I was legally there, but I was meant to be doing student work. I was allowed to do work sort of supporting whatever.' The report highlights a contradiction with Musk's current views. While now supporting 's re-election and his hardline stance on immigration, Musk's own path to success may have included working in a legal 'grey area.'
